Merck may get $3.3 billion payment

Royalty agreement deal to trigger AstraZeneca payment

LONDON (MarketWatch) -- Merck & Co.'s in line for a payment that may amount to $3.3 billion, AstraZeneca said Tuesday.

The U.K. pharmaceutical said Merck
MRK, -1.87%
in 2008 can exercise an option to get the payment, which likely won't exceed a threshold set at $3.3 billion.

In a statement, AstraZeneca
AZN, -0.06%
(AZN) said the payment won't effect cash returns to shareholders, and its arrangements may have a slightly positive effect on earnings after 2008 with amortization of intangibles excluded.

Merck currently receives royalty payments on AstraZeneca drugs including Nexium and Toprol-XL, and Merck also has an option that would force AstraZeneca to buy its interest in other drugs such as Plendil and the now-withdrawn Exanta. See external link to AstraZeneca presentation.

The option stems from a 1998 deal under which the firm then known as Astra unwound a 50-50 joint venture with Merck.

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